Janesville plant survives, but it's riding on big SUVs

When General Motors Corp. announced its latest round of plant closings and Janesville, Wis., was not on the list, many in town breathed a sigh of relief.

Several analysts had identified Janesville, which builds large sport-utility vehicles, as likely to close, but the plant's 3,800 workers survived another scare.

Still, there was little joy among the skeleton crew of hourly and salaried workers on duty at the plant, which is closed for Thanksgiving, after Chairman and Chief Executive Rick Wagoner said on Monday that GM would shut nine other plants and cut 30,000 jobs.

"It was very solemn," said GM spokeswoman Carolyn Markey, one of those at the plant Monday. "A lot of people are losing their jobs, and we all know people who have transferred from here. There certainly was no cheering."

Tom Brien, a United Auto Workers union member at the plant since 1967, added: "Even though we came out of this in good shape, our hearts go out to those employees who are going to lose their jobs."

How long Janesville's reprieve lasts hinges on the fortunes of GM, which has lost nearly $4 billion this year and has not said when it expects to be profitable.

On Tuesday, General Motors said it will record the largest portion of the costs of shutting down 12 North American facilities this quarter.

The estimated cost of the restructuring will be disclosed in the next several weeks, the automaker said in a regulatory filing.

Janesville's survival also depends on whether the large SUVs the plant builds will succeed in a market that is shifting to smaller, more efficient vehicles. The SUVs are the Chevrolet Tahoe and Suburban and GMC Yukon and Yukon XL, and sales are down 19 percent this year.

Janesville will begin production of new versions of those SUVs, models GM has been banking on, early next year. New models typically have a six- or seven-year life cycle, but that could shrink if gas prices curb sales or GM is forced to make deeper cuts.

"We're just starting out with a new generation of SUVs, so we should be good for a while," Brien said. "But in the auto business, there's no such thing as a guarantee."

Brien thinks Janesville survived GM's cuts because the plant, one of GM's oldest, produces high-quality vehicles and UAW Local 95 has cooperated with management to increase productivity at the plant.

"The workforce has really turned things around here the last couple of years," he said. "We've done a lot of the right things to make sure Janesville stays open."

Local 95 President Mike Sheridan declined a request for an interview for this story.

Longer term, the factory faces another issue: The paint shop there is aging and will need to be replaced or refurbished in less than 10 years, according to UAW members and leaders. A new paint shop could cost $500 million or more, and GM will have to decide whether to invest in a major overhaul, build a new facility in Janesville or leave town. The plant was built in 1919, though it has undergone several additions and renovations in the last 30 years. GM has already spent $175 million to prepare the plant for the new models.

"There is no question that is a very expensive rehab, and there has been open talk about the need for it," said John Beckord, president of Forward Janesville Inc., the local economic development agency.

Community pitches in

Local leaders are thinking of ways to keep GM. Among the current efforts is to identify locations for a new plant.

"These are options being casually discussed at this point," he said. "We need to look forward and be able to offer them a package to build an entirely new plant. We will be working every possible angle to provide an ideal site and the right incentives to keep it here."

Brien, a member of Janesville's City Council for 15 years, said the city has built a road that allows direct access from Interstate Highways 90 and 39 to the plant and campaigned with the state to lower property tax assessments on GM's property.

"The city has done everything they could to keep the plant here in Janesville," he said.

GM is the largest employer in Janesville--population 65,000--with a direct payroll of $250 million. Parts suppliers and companies that provide services and maintenance for the plant probably employ more than 3,500, making the local economy heavily dependent on GM.

"It's a remarkably important part of our local economy," Beckord said, adding that if GM left "it would be a very difficult recovery period for a decade.

"But this is not a one-horse town," he added. "They're still the dominant player, but they're not the only game in town."

Janesville, 100 miles northwest of Chicago, has undergone what Beckord calls "natural diversification."

Some 10 years ago, the GM plant employed nearly twice as many as it does now. As jobs have fallen at GM, Beckord says the area has attracted new businesses and encouraged existing companies to expand through tax incentives.

Major employers include Lab Safety Supply Inc., which makes industrial and safety equipment; Hufcor Inc., a builder of portable walls and partitions; and a Seneca Foods processing plant. Among recent additions are a Deere & Co. distribution center for lawn-care products and a plant that makes doors for Lowe's Cos.

"If you look at the map, you can put a plant here and easily get to Minneapolis, Chicago, Milwaukee or St. Louis. We're right on the interstate, and we have a lot of cheap land," he said.

Brien thinks Janesville could rebound if the plant closes.

"Initially, it would be bad, but I feel we could overcome it. Look at Kenosha. They lost a [Chrysler] plant, but they still turned things around. It's thriving," he said.